Case | HBS Case Collection | October 1991 (Revised November 1996)

Gordon Cain and the Sterling Group (A)

by Michael C. Jensen

Abstract

A Houston-based LBO firm makes two petrochemical acquisitions that benefit from improved industry conditions and improved organizational performance. The LBOs generate huge increases in value, creating problems for managers, who have large, undiversified equity holdings. The firm decides to sell one company after a year, and to take the other company public after two. Allows students to examine the causes of organizational change, the difficulties of managing success in closely held LBO companies, and the relative merits of various exit strategies.

Keywords: Organizational Change and Adaptation; Value Creation; Business Exit or Shutdown; Leveraged Buyouts; Chemical Industry; Houston;

Citation:

Jensen, Michael C. "Gordon Cain and the Sterling Group (A)." Harvard Business School Case 492-021, October 1991. (Revised November 1996.)